Hewlett-Packard Adds Whitworth to Board to Boost Credibility

Nov. 18 (Bloomberg) -- Hewlett-Packard Co., the largest
computer maker, is adding activist shareholder Ralph Whitworth
to its board to help shore up investor confidence shaken by
strategy shifts and slashed sales forecasts.

Whitworth, whose Relational Investors LLC held about 17.5
million Hewlett-Packard shares as of Sept. 30, is joining the
board’s compensation committee and its finance and investment
committee, Hewlett-Packard said in a statement yesterday.

Hewlett-Packard aims to assuage investors who sold stock
amid a growth slowdown in the months before Meg Whitman replaced
Leo Apotheker as chief executive officer. Whitworth, whose firm
oversees $6.5 billion, told management his appointment would
burnish credibility and that he’d press for share buybacks,
higher dividends or more investment in research and development,
a person with knowledge of the talks said.

“It’s definitely a positive development for the company,”
said Brian Marshall, an analyst at ISI Group in San Francisco.
“The board needs help, and Ralph has the background to help
them.”

Hewlett-Packard, based in Palo Alto, California, also
appointed Rajiv Gupta as lead independent director. Whitworth
brings the total number of board members to 14.

Hewlett-Packard rose 2.6 percent to $27.99 at the close.
The stock have slipped 34 percent this year.

Buybacks, Dividends

Whitworth, 56, has used his shareholdings to agitate for
change at other companies, including industrial conglomerate ITT
Corp. and defense contractor L-3 Communications Holdings Inc.

Relational, based in San Diego, began accumulating its
stake in late August, according to the person with knowledge of
the transactions. That came after Hewlett-Packard announced
plans to buy Autonomy Corp. for $10.3 billion and said it might
spin off the personal-computer division. Investors said Hewlett-Packard overpaid for Autonomy and that the proposed spinoff was
ill conceived. The firm kept buying shares through September,
this person said. Whitman was appointed on Sept. 22.

Whitworth contacted Whitman and Executive Chairman Ray Lane
in early October, the person said. After a few weeks of
conversation, the company agreed to put Whitworth on the board,
this person said.

Whitman, former CEO of online commerce pioneer EBay Inc.,
has already begun reversing strategies pursued by her
predecessor. Last month, she abandoned a proposal to spin off
the company’s market-leading PC unit and she shares management
responsibilities with Lane.

ITT, L-3

Relational pushed for changes at industrial products maker
ITT and L-3 Communications before those companies announced
spinoffs this year. Last year, Whitworth was elected to the
board of Genzyme Corp., which in February agreed to a sale to
Sanofi-Aventis SA after a nine-month pursuit.

Whitworth served as chairman of Waste Management Inc. from
1999 to 2004, overseeing a turnaround at the company after it
settled lawsuits alleging former executives overstated earnings.
He also led an effort at Tyco International Ltd. to oust
directors who served under former CEO Dennis Kozlowski, and sat
on the board of Apria HealthCare Group Inc., which was acquired
by Blackstone Group LP in a 2008 buyout.

Whitworth and David Batchelder founded Relational in 1996
with an initial allocation of $200 million from the California
Public Employees’ Retirement System, the nation’s largest public
pension fund. The two had previously worked for billionaire oil
executive T. Boone Pickens.